The growing number of interjurisdictional workers (IJWs) in Canada’s North means government and private sector planners need to grow a new awareness of the serious economic impact these workers can cause. -By Joseph Warren

Interjurisdictional workers (IJWs) are an essential part of keeping Canada’s public and private sector going throughout the Northern provinces. However, the growing number of these workers means that their economic impact can no longer be ignored. Here, the benefits, challenges, and estimated future impact of IJWs in Canada’s North will be discussed with an eye toward realistic and practical outcomes.

The Benefits Interjurisdictional Workers Provide to Jurisdictions

IJWs fill gaps in specific jurisdictions, communities, and provinces where a localized skill sets is lacking or where the local labor pool is too small. As such, IJWs are an important force in keeping industries and government services thriving. The individuals themselves can also be a valued source of economic activity, as they spend on food services, entertainment, and housing during their contracts. In certain cases, IJWs also serve to help open up additional economic opportunities for local residents by helping new ventures or resource developments get up and running.

The Tax Issue Caused by Interjurisdictional Workers

Even as they provide benefits, IJWs also create an underlying tax issue that is coming to the attention of more and more local governments. It is of particular concern in smaller territories and provinces where they have a higher percentage of IJWs in their workforce and where local tax revenue is at a premium.

The tax issue stems from the fact that while the province or territory is where the IJW earns their wages and consumes local public services, the taxes on those wages actually flow to the local government of their home residence. Thus, the home province benefits from the tax revenue earned on the income, while the jurisdiction providing the wages and the public services to the worker gets nothing. This creates an economic imbalance which smaller territories find difficult to manage.

Interjurisdictional Employment in Canada 2002-2019 Study Results

As a result of the tax revenue inequality among the territories and provinces in regards to their respective workforces, Statistics Canada studied data from the Canadian Employer-Employee Dynamics Database (CEEDD) from the years 2002 to 2019. The goal was to determine how much interjurisdictional employment was occurring in Canada, the overall percentage of interjurisdictional employment compared to total employment in the Canadian workforce, and how interjurisdictional employment has changed over a 17-year period.

The study showed interjurisdictional employment has not grown even over the past two decades. It flows in a boom-bust framework. It surged during the period of 2002 through 2008, then again from the period of 2010 through 2015, and most recently has trended upwards since 2017.

Overall, there were about 330,000 interjurisdictional employees in Canada in 2002. At the end of this study data’s period in 2019, there were about 440,000 interjurisdictional workers in Canada, an increase of about 33%. The percentage of interjurisdictional employees as compared to the total workforce in Canada was just 2.6% in 2019, or about 26 out of every 1,000 employees. The boom-bust cycle in the employment graph correlated loosely with world oil industry employment trends, but this was not the only factor impacting IJW levels.

Provinces With Net Losses Versus Net Gains From Interjurisdictional Employees

The impact of IJWs is unevenly distributed across Canada, and indeed, between provinces. Provinces with greater levels of net “leavers” between 2002 and 2019 included Quebec, Newfoundland and Labrador, British Columbia, New Brunswick, Saskatchewan, Nova Scotia, Manitoba, and Prince Edward Island. In contrast the provinces that had the greatest levels of net “incomers” included Ontario, Alberta, Northwest Territories, Nunavut, and Yukon.

Statistics Canada broke down each province or territory’s numbers of incoming and outgoing interjurisdictional employees, as well as its resident employees in a separate report. This showed that the impact of fewer interjurisdictional workers coming in versus those going out of the province or territory was sometimes much higher than the net average. For instance, when considering Newfoundland and Labrador’s year-to-year net numbers, there were some years, including the period between 2006 to 2010, where the net loss each year was over 15,000, much higher than the net average of -12,960. Thus, the economic impacts and stark contrasts between gaining and losing workers were sometimes even more startling and drastic than net averages would indicate.

Further Information and Analysis of IJW Movement and Economic Impact

The group of provinces and territories that had a net loss of workers were also the provinces and territories that struggled with higher unemployment rates. When comparing higher unemployment rates with cross-regional differences in wage growth and general economic performance, it becomes very understandable why “leavers” would look for employment opportunities in other provinces and territories.

Additionally, what benefited the net receiving provinces and territories was the numerous employment opportunities offered by the oil industry in those specific provinces and territories. Those opportunities also often came with higher wages than were offered by employment opportunities in other industries. This is a part of why provinces such as Ontario and Alberta averaged around 50,000 interjurisdictional employees, and why similar numbers of workers exited areas like Quebec and Newfoundland and Labrador to take up oilfield jobs.

Expected Consequences of Interjurisdictional Workers Localizing and Shifting Their Tax Homes

While IJW incomes are often thought of purely in terms of what they take back to their home provinces or territories, they hold the potential for a large impact on their workplace economics. If IJWs became residents and spent locally, there are a number of large economic impacts that would happen.

First, the territories or regions where these IJWs are employed would receive money from these workers paying for goods. This might include things like meals when they are on break from work or off from work, as well as entertainment when they are away from work. They would also spend on services (such as paying for public transportation within the area to and from work, as well as around the area when away from work).

Second, if workers localized, they would be paying taxes on their wages in their new “home” provinces or territories. Thus, their previous home province or territory would not get the benefit of the taxes on those wages. This would address some of the economic imbalance due to wages taxes.

Thirdly, if workers localized, it would go a long way toward helping smaller and more thinly populated locales make needed upgrades to their local infrastructure. They could invest in schools, health networks, roadways, and more. Many Northern provinces are hungry for revenues, but are finding that too few IJWs choose to move their permanent residences to meet their immediate cash flow needs.

As a result, since workers are not themselves choosing to localize in droves, smaller provinces and territories are looking into the relevant tax issues and changes that could be made. Changes in laws could lead to a monumental shift in future incoming and outgoing IJW statistics and which provinces and territories are gaining more workers versus losing more workers. However, this is a move that would take some time to implement, perhaps even years. Thus, at present, government and industry groups are left to try and work within the current structure to support development and encourage localization of IJWs, even as they lobby for changes to governing tax laws and wage systems.